Pakistani purveyors of a lightweight cotton, which has become a national craze in its home country, are looking to a historic opening of the Indian market for a big boost in sales.

The decision announced by the Indian government on Wednesday to lift a longstanding ban on Pakistani businesses setting up shop in India has been hailed as a breakthrough in efforts to boost anaemic levels of trade between the neighbouring countries.

One newspaper even said the decision to allow Pakistani business people to invest in India had the potential to "drastically reshape the Pakistani economy" which for decades has been blocked from a vast potential market of like-minded consumers in India by simmering political tensions.

But of all the products that are expected to start flowing eastwards across the border it is a Pakistani speciality known as "lawn" that could be the first through the gates. For decades the traditional cotton cloth has been bought by women who have used it to make elegant outfits that are particularly well-suited to the steamy south Asian summer.

In recent years the country's fashion designers have revamped the staid designs produced by textile mills, creating a hugely popular branded product.

Advertising hoardings in cities are now plastered with giant images of Pakistan's top models showing off the latest lawn collections. Shops boasting the most desirable designers have been overwhelmed by feisty, and sometimes violent, female buyers on the first day new lawn goes on sale.

Indian consumers showed a similar enthusiasm for Pakistani design at a trade show in Delhi earlier in the year where many of the lawn retailers were mobbed by crowds.

Pakistan's only beer manufacturer has already announced a tie-up plan that will see its brew made under license in India. But Bashir Ali Muhammad, chairman of Gul Ahmed Textile Mills, one of the country's largest producers of lawn, said India would have to make even more concessions if cross-border trade is to really pick up.

"This decision is a very good sign from the Indian side but they really have to lower duties on imports, not just for Pakistan but for the whole world," he said. "India for a long time has been too nationalistic about protecting its market."

The two sides are currently negotiating a new trade regime and what items should be on a "negative list" of goods that will not be tradable across the border. India has already ruled that Pakistani businesses will not be allowed to invest in defence, space and atomic energy companies.

After years of tensions and three wars, the amount of trade between the enormous south Asian countries is negligible. There is a consensus among Pakistan's mainstream political parties in favour of normalising trade relations with India, both to boost the country's failing economy and in the hope that stronger business ties may lead to progress towards peace.

However, huge disagreements remain, including the status of Kashmir, the Muslim-majority mountainous state that Pakistan claims for itself.

Last week, Indian officials said they had found a 300-metre tunnel on their side of the disputed "line of control" running directly from a Pakistani military checkpoint. They said it was designed to allow Pakistani-backed Islamic militants to infiltrate into the Indian side.